Beyond compliance: Exchanging information with Integrity and Quality Proprietary and Confidential by Unitech Systems Inc. All rights reserved

2 Agenda Regulatory Environment Enterprise Information Model Compliance through quality and integrity Key Benefits

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 3 Agenda Regulatory Environment Enterprise Information Model Compliance through quality and integrity Key Benefits

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 4 Regulatory Environment Timeline Basel I (1988) Data Protection Act (1998) IASB(2001) Sarbanes Oxley (2002) HIPPA Cromme Code (2002/2003) for Germany UK Companies Bill(2002/2003) Basel II (2004) IAS/IFRS (2005) Basel III (2008) ? …………. [Ref: Gartner, 2004, BMC Inc]

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 5 Basel II

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 6 Operational Risk The risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. 30 banks had reported total operational losses of around 2.6 billion euros. Ref: BIS, “Quantitative Impact Study”, 2002; Rick Harris, “Domestic regulatory approaches to operational risk”, 2002

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 7 Where is the error ? The most likely and the most costly operational risk- prone- events were in process management. [ Ref: Risk Management Group, The quantitative impact study for operational risk: Overview of individual loss data and lessons learned. Report to Basel Committee on Banking Supervision, Bank for International Settlements, (January) ] Process variation Lack of Information Integrity

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 8 How to Minimize Operational Risk You need a management system foundation to contain all of your risk-prone areas You need a methodology that accommodates root cause analysis, gap remediation, and internal control profiling You need an information integrity framework to assure the dependability of information flows and process efficiency.

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 9 Agenda Corporate Governance & Regulatory Environment Enterprise Information Model Compliance through quality and integrity Key Benefits

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 10 A Comprehensive EIM Any Enterprise Information Model (EIM) is a comprehensive framework for identifying focal business processes for integrity evaluation The four quadrants can be populated with issues and processes representing every aspect of enterprise operations

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 11 What is Information Integrity? Information Integrity (I*I) is the trustworthiness or dependability of information as defined by the accuracy, consistency & reliability of information content, processes and systems. Accuracy: The degree of agreement between a particular value and an identified source that provides the correct value at a specific point in time. Consistency: The degree of agreement among repeated instances of the same information (occur in space, over time, and in relation to one another at the same point in time). Reliability: The degree to which information is complete, current, and verifiable.

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 12 Semantics Matter in the Information Age WO C1805E190 0E Date: July 23, 2003 Airline: World Flight Number: 2555 Take off time: 1:00 PM [CST] Scheduled Landing: 6:05 PM Eastern Actual Landing: 7:00 PM Eastern Percentage On Time Arrivals In Last: Month55% Six Months65% Year75% Average Minutes Late In Last: Month42 Six Months22 Year24 If I take this flight, I will probably miss my dinner meeting because an increasing number of flights are late by an increasing margin Maybe I should fly on a different carrier InformationDataKnowledgeWisdom

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 13 Basel II | Information Integrity Issues Accuracy of Information Basel II requires accurate information about transactions Basel II requires that banks to have five (5) years of loss data. It requires use of external data. Basel II requires disclosed information to be accurate Challenges How assure the accuracy of financial transactions? Are we confident of the end of day balance ? How to assure Accuracy and completeness of external data provided by consortiums or third party providers is not known How to assure the accuracy of the disclosure information Ref: “Information Integrity and Basel II” by Stephen M. Schoneman, Oct 2004

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 14 Basel II | Information Integrity Issues Consistency of Information Basel II is very prescriptive for Credit Risk Management processes and data; not so for Operational Risk Strong peer bank information sharing on approaches and issues associated with Operational Risk Management and Measurement Challenges Not enough guidance on Operational Risk from regulators Concerns remain about comparability of data from bank to bank, especially related to Disclosure requirements Consistency of the risk assessment process and interpretation of information across business lines Ref: “Information Integrity and Basel II” by Stephen M. Schoneman, Oct 2004

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 15 Basel II | Information Integrity Issues Reliability of Information Banks will need to consider improving both arrangements for receipt of information from correspondents and the time they conduct their own reconciliations Dependent on many managers adhering risk management policies and practices Disclosure (Pillar III) of Risk and Capital information to shareholders/public will be subject to external audit Challenges Need approach for determining relevance of external data Need system/s to capture, monitor, manage and report on loss events, key risk indicators, risk assessments, modeling, etc. Need a common language for addressing these issues Ref: “Information Integrity and Basel II” by Stephen M. Schoneman, Oct 2004 ; BIS, 1999

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 16 Agenda Regulatory Environment Enterprise Information Model Compliance through quality and integrity Key Benefits

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 17 Quality and I*I Integration

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 18 Several Concepts – Several Tools Quality Management Risk Management Control Management Information Integrity Management Six Sigma, Quality Circle Business Process Reengineering Integrity Risk Assessment Security Risk Assessment (COSO Enterprise Risk Management Framework ) Risk Management Framework

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 19 Comprehensive Risk Management Approach Ref: COSO Enterprise Risk Management Framework, 2004 Quality management Integrity Management

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 20 Basel II | Use of quality tools and I*I tools Op Risk NeedsSix Sigma Can ProvideI*I can provide Identification of critical processes and activities Hierarchical, process view of a business Hierarchical, information flow view of a process Monitoring of key indicators and warning of potential problems Process Management & Control Integrity risk management and control Cure problems in existing processes Process Improvement via DMAIC & Lean Automated information controls Prevention of problems for new processes Process Design via DFSS Process design through I*I lens Ref: AON Inc., 2004

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 21 Basel II | Use of quality tools and I*I tools 6 Sigma and other tools I*I, 6 sigma and other tools

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 22 Agenda Regulatory Environment Enterprise Information Model Compliance through quality and integrity Key Benefits

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 23 Key Benefits Enterprise-based The Enterprise Information Model embraces all major processes in the enterprise. One tool provides the total perspective Process-Focused Our approach is driven by a relentless focus on practical process understanding. As a result, we connect with management thinking and deliver practical integrity improvements. Effective/Efficient We look at processes from both effectiveness and efficiency perspectives, thus broadening performance impact Compliance-rich Unitech is particularly suitable for supporting Sarbanes-Oxley and Basel II compliance initiatives. We provide internal control environment profiling Generally adaptable Unitech’s approach can be applied to ANY business process, yielding powerful insights into information integrity, as well as performance improvement potential

Proprietary and Confidential by Unitech Systems Inc. All rights reserved 24 More Resources